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How do I record Required Minimum Distribution taken from Investment account

Nancy Keith

I took a distribution from my IRA account in 2020. When I transferred the cash needed from my brokerage account to my checking account, there doesn't seem to be a way in which to record this income since the transaction is technically just a transfer. What can I do to record the income to the proper category?

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Tom Young

There's two distinct elements to the accounting for an IRA distribution.

The first is what I'd call the "pure accounting" (GAPP) approach. From that perspective any income generated has been accounting for as "dividends", "interest" or some other form of income in the IRA Account, and the distribution out of the IRA and into your bank account is a simple "transfer" of funds from one Account to another Account. That is, there's no "category" (Quicken-speak for "income" or "expense") that can be applied here.

Quicken's reporting system is flexible enough that you can report this transfer as a form of "income" on a spending report, if you wish, where it will show up as a line item in the Income section of the report as "FROM [Name of IRA Account]."

The second accounting approach is the "statutory" approach, that is the accounting required by the IRS. To handle that properly what you need to do is edit the IRA Account, click on the "Tax Schedule" button on the General tab of the Account, and on the "Tax Schedule Information" window that shows up select "1099-R:Total IRA gross distrib." on the "Transfers out" line. That will allow the transfer to show up correctly as an income item on the Tax Schedule report.

Nancy Keith

Thank you, I did this as instructed. I actually took the distribution a year ago and this didn't change the outcome on the Tax Schedule Report for 2020. Will my next distribution be categorized correctly?
Nancy Keith

NotACPA

The change recommended by @Tom Young should have impacted ALL transfers out of the account, past present or future.

Re-read his last paragraph to make sure you did it correctly and also check your Tax Schedule report to insure that the retirement acct was selected for inclusion.

Tom Young

Hi Nancy:

It seems to me that the distribution should show up IF the "from" and "to" Accounts are both included in the tax report and the report is customized to pick up transfers, so check both of those things.

However, I just did a test in test file that I set up to make sure that this transfer would appear in the tax report, and it's not. I don't know if this is a bug or has something to do with the fact that the association of the transfer to the tax report occurred after the transfer itself. Let me see if another SuperUser can clear that up.

But before that, what version of Quicken are you using and what release? (Help > About Quicken)

Tom Young

@NotACPA

See my post above about this.

I set up a two-Account file, one being a traditional IRA, funded the IRA with an opening balance and then did a 2020 transfer (WithdrawX) before setting any tax attributes for the IRA Account. I then went to the tax attributes for the Account and saw that the Transfers out line had already been set to "1099-R:Total IRA gross distrib."

But despite making sure that both Accounts are feeding the tax report and transfers are included in the report, the distribution is not showing up in a 2020 Tax Schedule.

R30.14

Rocket J Squirrel

Tom Young said:

edit the IRA Account, click on the "Tax Schedule" button on the General tab of the Account, and on the "Tax Schedule Information" window that shows up select "1099-R:Total IRA gross distrib." on the "Transfers out" line. That will allow the transfer to show up correctly as an income item on the Tax Schedule report.

It is better to use "1099-R:Total IRA taxable distrib." as the tax line item so the Tax Planner will properly account for it.

There is also, shall we say, a quirk which requires you to enter the distribution in the receiving account as a Deposit transfer in from the IRA. If you enter the distribution in the IRA as a transfer out, Quicken will miss it in it some calculations.

Tom Young

"It is better to use "1099-R:Total IRA taxable distrib." as the tax line item so the Tax Planner will properly account for it."

In my working file the setup for the wife's CALPERS Account - setup as a Traditional IRA in Quicken - uses the "1099-R:Total IRA gross distrib." attribute and shows up properly in the Tax Schedule.

"There is also, shall we say, a quirk which requires you to enter the distribution in the receiving account as a Deposit transfer in from the IRA."

That was the ticket to success.

Tom Young

@Nancy Keith

@Rocket J Squirrel 's pointer to originating the transfer in the receiving Account did the trick and the transfer showed up properly in my test file. Try that and see if you don't get the same results. Next year, remember to originate the transfer in the same fashion.

Rocket J Squirrel

@Tom Young , I'm talking about the Tax Planner, not the Tax Schedule Report. To get the Tax Planner to properly account for IRA/Pension distributions, you must use the "taxable distrib."

Image: https://us.v-cdn.net/6031128/uploads/editor/t3/stiimeft8jzq.png

Nancy Keith

R 31.8. Build 27.1.31.8

What ended up working was to set the IRA account itself to 1099-R: Total IRA Taxable Distrib. If I set the receiving account to that instead, all transfers into that receiving account were dumped there as well. Jeez, you guys are awesome!

Tom Young

@Rocket J Squirrel

Yeah, I elided right past the word "Planner" since that's a feature in Quicken I've never used.

Harold-Jr

I have been trying to solve this problem for years. Quicken correctly assigns 401K withdrawals to 1099-R but not IRAs. After reading your summaries, I realized that I had assigned IRA withdrawals to "gross" not "taxable." I then went to look at the 401K to make a similar change, and Quicken told me not to do that, the program takes care of the category. Better reports next year. Thank you.

Dana

I found the RMD showing up in my Tax Schedule. However, because I had the IRA distribution transferred to an investment account (with checking account abilities), I had to create a second transaction in the IRA account for the cash transfer, so that the cash amount in the IRA stayed the same.

Jim_Harman

To summarize a good way to record taxable distributions from an IRA, please see the following instructions:

It can be tricky to record distributions such as RMDs from a tax deferred account to a taxable account in Quicken so that the tax implications are captured correctly, especially if taxes are withheld from the distribution..

There are no built-in Categories for IRA tax withholding; you must set them up yourself. I use these:

Tax Fed:Fed IRA WH with a tax line item of 1099-R:IRA federal tax withheld
Tax State:State IRA WH with a tax line item of 1099-R:IRA state tax withheld

In the IRA, click on the gear at the top right and select Edit account details. Click on Tax Schedule and set Transfers out to "1099-R:Total IRA taxable distrib." If you don’t see the Tax Schedule button at the bottom of the Account Details dialog, click on View in the top menu and select “Tabs to show”. In the list of tabs, select Planning.

Enter one or more Sold transactions for the securities that were sold. This will put a cash balance in the account equal to the total amount of the distribution, including any taxes that were withheld.

If no taxes are withheld from the distribution, you can simply enter the distribution in the IRA as a transfer to the receiving account.

If taxes are withheld from the distribution, the process is more complicated because you must record the gross distribution as well as the withholding(s) in the receiving account. To do this, go to the receiving account and:

1) Enter a Deposit transaction for the net amount of the RMD as a positive number.

2) Split the Category:

Line 1 of the split: Category = the IRA account name in [square brackets] for the gross amount as a positive number. This will create a transfer from the IRA.
Line 2 of the split: Category = the Fed tax withholding category that you use, as a negative number.
Line 3 of the split: Category = the State tax withholding category that you use, as a negative number.
Total of the split: Must equal the net amount of the deposit.

If the deposit is made to a banking account between Jan. 1 and April 15, you will see a dialog titled “Confirm Your Contribution Tax Year”, even though this is a distribution and not a contribution. Select the current year, not the default of the previous year, and click on OK. This seems to be a bug.

If you receive the distributions regularly, you can save repeated manual entry by setting up this transaction as an Income Reminder.

If taxes were withheld, you must delete or not accept any downloaded transactions in the IRA for the net distribution and the withholding.

With this setup, the taxable income will be shown in the Tax Planner and the “1099-R Total IRA Taxable distrib.” and any tax withholding in the withholding sections of the Tax Schedule report.